Small lenders are cutting their rates to keep up with majors

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With major banks such as Macquarie and ANZ cutting rates by up to 60 basis points, it was only a matter of time before smaller lenders followed suit.

Lenders such as Bankwest, AMP Bank, and ME Bank are expected to cut up to 50 basis points off three-year term rates. Other lenders, including St George Bank, are set to increase cash incentives for owners of multiple properties who are thinking about refinancing.

“All of the big banks have been cutting fixed rates in recent weeks and the trend is being picked up by the rest of the market,” Steven Mickenbecker, group executive of rate monitoring service Canstar, told Financial Review.

Small lenders are eager to stay competitive in light of recent moves by the majors to scale back their rates. “The big four cutting rates is forcing smaller lenders to follow suit to stay in the game,” said Sally Tindall, research director for RateCity.com.au.

Lenders are also anticipating greater demand for home mortgages following the re-election of the Morrison government. The campaign promised the retention of negative gearing concessions and the establishment of a first home-buyer guarantee scheme. The Reserve Bank is also expected to cut cash rates in the coming months, from a record low of 1.5%.

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